Facebook IPO; the Innumerable Possibilities
Muhammad is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
From the outset of this year, Wall Street has been rambling about the Facebook IPO. This initial public offering is expected to set a landmark in the internet industry. Some analysts even argue that Facebook may move to rattle prominent big wigs like Google (NASDAQ: GOOG) and Microsoft. Another section, definitely of optimistic nature, is surefooted that it will soar to the heights of Apple. Estimated at $70 to $100 billion, the IPO will definitely put Facebook on the map. The social network will now have a somewhat even ground to battle core competitor Yahoo. All said speculations, predictions and downright gambling are all that shadow this highly anticipated IPO. Facebook’s near future is mounted on uncertain grounds and the extreme possibilities are overwhelming. Personally, I prefer delving through the profound possibilities on both sides of the coin; this is safer than taking a leap of faith.
Warren Buffet, a shrewd investor and one the richest persons in the world, does not advocate for the IPO. Although, he is typical of steering clear of IPOs, this particular move has posed a really big question. Is the Facebook IPO really worth the hype? A good section of the bearish disposition has backed Buffet’s outlook. Most critics argue that the hype and promise of fortune is all too common with IPOs. They go on to insist that Facebook will not be able to combat competition from heavyweights like Google. This is especially so because Google has a notable stake in the advertising frontier. To further fortify its dominance, Google has squeezed into the social scene with Google+. Analysts in the bearish incline argue that Google could bottleneck Facebook’s prosperity by bringing in new products and integrating the old with the new. In my line of thought, I believe that the bearish outlook indeed carries some shred of logical sense. However, it predominantly leans on one side. The outlook doesn’t key in the fact that Facebook exhibits an exceedingly high potential to grow; its 8 year stretch from a dorm room affair to a global social network tells it all. While the IPO is a long shot, I am confident that it is a positive turning point for Facebook.
Still on Google, the aggressiveness with which it steers its day to day operations cannot pass by unnoticed. Just recently it ramped up its overall service by improving its SEO algorithm. This move was geared towards salvaging the internet from third rate content that had become all too common. This has been a big plus. A section of investors are confident that Google’s improved outlook will suppress competition from Facebook.
Likewise, Google’s privacy issue that attracted a lot of criticism now seems to be working in its favor. The whole privacy issue emanated after Google announced that it would place tabs on search patterns for users subscribed to its products. This way it would be able to provide ads related to the users’ search history. In my opinion, I believe that this will act in the advantage of Google in the long haul. Facebook needs to tactfully come up with a counter strategy that won’t necessarily intrude privacy but will ultimately improve the quality of ads. In my view, Mark Zuckerberg has definitely keyed in this important factor.
What about Twitter? This is a predominant question. The competition from twitter is simply overwhelming. Twitter has an edge in terms of advertising. This is because it does not accommodate lengthy adverts. It instead allows advertisers to use short messages, better known as tweets, to constantly update subscribers on news and status. This means that Facebook has to be ready to handle the pressure that apparently streams in from all angles.
Being new in the stock market, Facebook has impressed many with the acquisition of Instagram. In person, I believe that the move speaks volumes of Facebook’s tact and aggression; two highly desirable lineaments if I may add. Facebook is aware that its foundation in the mobile sector is somewhat flimsy. By acquiring Instagram, it will manage to cast its nest over a higher percentage of mobile users. The $1 billion acquisition may just be the beginning of a long list of other high profile acquisitions in Facebook’s portfolio. Personally, I am inclined to believe that Facebook will absorb smaller players through such acquisitions. In the process it will not only snuff out competition, but build enough muscle to battle it out with behemoths like Google.
There have been concerns that Mark Zuckerberg, the 27 year old CEO at Facebook, may invite a quasi dictatorship scenario at Facebook. This is chiefly because Zuckerberg will control an approximated 57% voting power in the outstanding capital stock. In my opinion, such possibilities are slim if not nil. In as much as it is possible, it practically cannot happen. Mark Zuckerberg is far too balanced and ambitious to indulge in such. After all, he did build a multibillion establishment in eight years.
At the wake of the IPO, it will be all smiles for Facebook investors. The dust will have settled and Facebook will have a stronger financial backing to plough through the uncertainties. Personally, I would advocate for Facebook because it has foresight and exhibits strong fundamentals.
muhammadbazil owns shares of Google. The Motley Fool owns shares of Apple, Google, and Yahoo!. Motley Fool newsletter services recommend Apple, Google, and Yahoo!. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.